Sustainable Furniture Case Study

Efficiency and best practice have always been fundamental to J T Ellis & Co., furniture manufacturers of Huddersfield in West Yorkshire.

“We never set out specifically to be a sustainable company. The fact is that the way we run the company lets us tick most of the sustainability boxes.”

Ellis Furniture supplies kitchens and bathrooms to the retail sector and kitchens, bathrooms, bedrooms and a whole range of specialised furniture to contract clients. These include care homes and hotels, and schools, universities and other buildings in the public sector.

 “PFI has not been universally popular, but it’s been good news for us.”

PFI operators frequently have an obligation to maintain a building and its facilities for decades. Ellis uses traditional glue and dowel construction with high quality timber, which means they offer a quality product that lasts for years - and at a competitive price. Every product from Ellis Furniture has a 10-year guarantee, but in practice it will last much longer than that. Indeed, in a corner of the company’s showroom there’s a suite of student furniture that was originally installed in Durham University in 1985. It’s clearly seen a lot of use but it’s still functional. In principle it could be refurbished and re-used.

What makes a sustainable business?

First of all, the fact that Ellis makes durable and long-lasting products clearly demonstrates sustainable use of resources. Unfortunately, at present no-one gets recognition for making durable products. In the UK, where we generate 117 million tonnes of waste each year, the longer a product lasts the greater effect it has on reducing that figure - a contribution to sustainability that really shouldn’t be ignored. Secondly, the company carefully controls its raw materials. Wherever possible, timber comes from FSC (Forest Stewardship Council) certified sources, which means that every tree harvested comes from managed forests, and every tree is recorded and replaced. Walnut and cherry from the US are managed in a similar way but certified by a different body. Other countries have their own schemes. What is noticeable on the Ellis factory floor is that every stack of timber is tagged with details of origin. For every product shipped, the company knows exactly where the raw materials came from.   

I raised the question of energy security. How sustainable is a manufacturing business when there are predictions of national electricity blackouts within the next two years? Like most businesses, their energy supply is in the hands of the government, the generators and the weather. It’s just not practical to have a complete back-up generation system, and it’s not as though the factory is producing anything perishable that needs refrigeration or chemical reactions that must be held at a critical temperature. Of course there are essential services that must be protected so there’s a UPS in the computer room which will permit a managed shutdown of IT without loss of data. There’s also one diesel back-up unit on site. It sits next to a massive water tank which feeds the sprinkler system. Every Monday it’s fired up to prove it’s ready and waiting should an emergency occur.

And renewable energy?

What about renewables? A 200,000 square foot factory has a lot of roof area and it’s no surprise that solar panels are under serious consideration. They will never supply all the factory’s needs, but the current subsidy regime means they will make a significant saving and certainly more than pay for themselves.

Another aspect of energy is more problematical. Ellis Furniture has to dispose of waste, and offcuts of timber and strip are collected by a company which remanufactures them into particle board. All very green, although Ellis still has to pay for the waste to be taken away. Enter the government with its subsidies for biomass boilers. The policy was set up to support electricity generators such as Drax Power - operators of the UK’s largest power station - to convert to more environmentally-friendly biomass. (Whether it is truly environmentally friendly is a debate for another day!) In view of the massive investment involved, some £700m, the government has confirmed that the scheme will stay in place at least until 2037. Back in Huddersfield the regulations mean there’s a choice between recycling the timber waste at a cost and saving money on energy by burning it in a biomass boiler. It's a simple choice. Burning it in a boiler is not as green as recycling it, but this is business.

Why ISO 14001?

Putting in an environmental management system (EMS) to ISO 14001 was in response to public sector clients. A lot of the implementation involved documenting practices and procedures which the company already had in place. The fact that the EMS has been installed means that clients immediately know that Ellis Furniture meets recognised standards. Indeed, having the standard is frequently a condition of tendering. Clients know that the EMS is revalidated each year, in this case by BSI, which is an added incentive to the company towards continuous improvement. With this in mind Ellis undertook a lean manufacturing project, which led them to a fundamental re-arrangement of the factory layout. They freed up enough space to allow them to give up off-site storage facilities and save the cost. The revised layout improves productivity as the work now comes to the operatives, following a logical flow, and they no longer have to follow the work.

What about packaging?

Most Ellis products are sent out without packaging. The majority of the business is with the public sector and contract customers. The company delivers these orders on its own transport, securing units to the sides of the van and separating them with blankets, which of course are used again and again. Units for the retail market are packaged in cardboard as the company does not handle delivery to the final consumer and needs to make sure they arrive safely. At least the cardboard can be recycled.

And finally…

I’ve often said that sustainable business is good business. It makes sense to get the standard and get the credit for it.  Ellis Furniture proves the point that good businesses are generally sustainable.

Thanks to Tom Ellis, Joint MD, JT Ellis & Co    

Flourishing in a Not-for-Profit World

This week Donnie Maclurcan presented his view of the future at Leeds University as part of the CASSE autumn programme.

Donnie’s thesis is that all organisations will be, or should be, Not-for-Profit (NfP) by the middle of the century. He started by explaining the difference between NfPs and the third sector, which used to be almost totally dependent on handouts. Now, 53% of NfP revenue is self-generated and used for the organisations’ social purpose. By contrast, in Donnie’s view the traditional capitalist for-Profit (fP) businesses are socially divisive and exacerbate economic inequality. This is not due to paying exorbitant salaries, but results from capital gains, dividends and inheritance. Apparently, just 85 individuals in this world control wealth equivalent to that owned by 3.5bn people. The constant growth of fPs brings ecological devastation.

Donnie challenges the accepted wisdom that states that competition and self-interest are what make society work. He believes that the centralisation of wealth and power creates social and economic stratification and a compulsion to consume. He challenges the myth (the American Dream) that anyone can be wealthy. In fact only 5% of Americans ever move from their original social/economic position. 

What should be done? Central market regulation? Concentrating power in the hands of the state is no better than concentrating it in the hands of the rich, and the line between the rich and the state can easily become blurred. Strong regulation can stifle innovation. Growth continues. Self-regulating capitalism? Donnie does not believe that we can rely on fPs to innovate the world out of ecological disaster. From his work on nanotechnology he does not even believe that fPs could achieve decarbonisation in time to avoid disaster. Self-regulating capitalism is still capitalism; still reliant on growth.

The Alternative Solution is the Not-for-Profit Enterprise, where the organisation socialises its profits. In other words it either uses its profits to further its social purpose or donates its profits to organisations benefiting the community. There are no shareholders demanding dividends and no owners who can turn a profit by selling of all or part of the business. 

NfPs are better because NfPs can outperform traditional businesses. The example of the credit unions versus the banks in the US was quoted, although Donnie did admit that in the US credit unions get special tax breaks. NfPs use freeware rather than expensive mainstream software. Employees are more motivated, empowered, working in organisations with a flatter structure. NfPs create open source research rather than licensing their intellectual property (IP) in order to make money from users as the traditional fP would. The motivation and commitment from working for an NfP can lead to remarkable productivity gains. The quoted example was that car manufacturer WIKISPEED could develop in 8 days what would take Toyota 30 years. (The politest thing I can say about that statistic is that I don’t believe it. Let’s not overstate the case now.) Examples of NfPs are Mozilla, creators of the Firefox browser, and Wikipedia.

“Working together is better” There’s more concern about the origin of products. NfPs are more ethical and they never plan for obsolescence. The wide availability of digital resources means that the barriers to entry to many businesses are very low. Capital costs are falling and crowd-funding, a completely new source of finance, is widely used by NfPs. For larger investments shares should be replaced with community bonds as has been tried in Canada. Holders receive a fixed return but have no part in the ownership of the enterprise and no right to a share of the profits, (although they can lose their total investment if things go wrong.)

Profits should be a means to an end, not an end in themselves. For this to happen, for the world’s wealth to be equitably distributed, NfPs are necessary, although not sufficient.

What do I think?

Undoubtedly global inequality needs to be tackled, and at first sight universal Not-for-Profit seems an ideal solution. I have a number of concerns. In the traditional model a company borrows money to set itself up. Service companies, ideas companies, software companies can be set up for pocket money. Manufacturing companies, retailers, farms, transport, power generators and heavy industry need significant investment. Some is borrowed as fixed interest bonds. Interest is paid whether profits are made or not. If it all goes wrong, bondholders get part of anything that’s left: shareholders get nothing. Nevertheless, shareholders invest. They support the company, they take the risk. If there’s no profit there’s no dividend. If it goes wrong shareholders can lose their whole investment. They invest in the knowledge that they are taking a risk and they expect to be rewarded for that risk with dividends in the good times and increasing value of their shares. They share in the growth in the value of a business that they have helped create. All businesses are risky, some more so than others. We need innovation, but innovating businesses can be the most risky of all. If we go to a total NfP model, who takes the risk? 

If we’re going to convert existing businesses to NfP who is going to buy out the existing shareholders, and what will they spend the money on? And if we nationalise everything are we ready for the backlash?

Can every enterprise be a social enterprise? Will we find people who will be motivated by every occupation? Even the dirtiest jobs?

I asked what would happen to pensions if there were no more shares for pension funds to buy. Buy bonds instead, but the increasing reach of the social sector and growing support for the elderly will mean a reducing requirement for pensions. Really? Sounds like David Cameron’s Big Society. (RIP) If I have foregone consumption throughout my life to assure a comfortable retirement I expect to enjoy it in proportion to the savings I’ve made, not rely on universal handouts!

I think climate change, resource depletion and the whole range of sustainability issues are the crucial priority of the moment. Not-for-Profit may be a useful context, but it's only one aspect of the big and threatening picture.

Donnie’s presentation was delivered with clarity and confidence without a single note or slide and kept our attention throughout. Lots to think about. After a struggle I’ve pre-ordered his book: How on Earth. I look forward to reading it and learning more.

EDF Energy shuts down four UK nuclear reactors

EDF has shut down four nuclear reactors, which means it has taken two power stations off line. The issue is not a nuclear problem; it relates to a defect discovered in one of the boilers related to the reactors. Although this problem has been found in only one boiler, all four reactors at Heysham-1 and Hartlepool, which share the design, have been shut down as a precautionary measure while further examination takes place. The outage is expected to last up to eight weeks.

For the moment the reduction in output is not a problem as electricity demand is always low in summer and there is currently plenty of wind. The reduction in output is not a significant proportion, although it would be critical if it occurred during peak winter demand. Energy bosses and OFGEM have all warned that the safety margin to prevent winter blackouts is vanishingly small. This is because many UK power stations of all types are coming to the end of their useful lives and being decommissioned. Renewables are not yet big enough to take up the slack and new nuclear power stations are still at least 10 years from coming into service, especially as legal disputes mean construction of the next new nuclear power stations is yet to start.

There’s no doubt that the UK has a serious problem with its energy policy and this is only one aspect. Reliance on imported fuels, especially from volatile areas like the Middle East and from Russia, is another factor threatening our energy security. The answer is increased renewables, and, even more important, we need to curb demand.

It’s in the hands of politicians, but generally they look five years ahead to the next election. Building a nuclear power station takes decades!

Sanctions on Russia - the best argument for renewable energy!

When the idea of a gas pipeline from Russia to Europe came up in the 1980s US president Ronald Reagan was strongly against it. At the time I couldn't see why, but the reason has become blindingly obvious in the last few weeks. Europe now gets up to a third of its natural gas from Russia and cannot afford to do anything that would cause Russia to turn it off. Of course loss of exports would hurt the Russian economy, but turning out the lights in Europe would have a devastating effect in only a few days. That's why Angela Merkel's response to Russia's involvement in Ukraine has been so low-key. David Cameron, on the other hand, has made much more fuss. He can afford to: the UK gets its gas elsewhere - from the British North Sea, from the Norwegian North Sea and from the Middle East. For the moment! Resources in the North Sea are running out, while Russian reserves are enormous. 

Britain, as much as the rest of Europe, needs to look at energy security, at energy that we can control within our own borders. That's why fracking is so attractive. It's exploiting British gas and oil. As commented elsewhere, fracking is no silver bullet. It's likely to be costly, there's no guarantee that the reserves can actually be recovered, there are pollution risks, there's strong public opposition and it produces fossil fuels which emit co2 when used. 

We need to explore all the options. Nuclear - under our control, but apart from all the arguments about pollution and waste disposal the plain fact is that it's no short-term solution. It will take a decade to bring a new nuclear station into production. Renewables. There's nowhere near enough capacity at present and it will take years of research and development to increase it significantly. Time to start now. Many people will complain that it can never be as cheap as coal, oil or gas. Probably true, but the age of cheap energy is over. Which would you rather have, expensive energy or none at all? 

The third step to securing our energy supplies is to minimise waste. Are you sitting in an office enjoying the sunshine with all the lights on as well? How many public buildings have the lights on 24/7? Lighting is only part of it. In a few weeks we'll have the heating on again. How hot is your home? What mpg do you get from your car? We need a government lead to encourage energy savings, otherwise we’re never going to do enough. Unfortunately the Green Deal didn't work so we need something else. Pushing energy prices up would do it, but it would make any government that did that unelectable. We need more public education, more investment in renewables, and a subsidised Green Deal ( the one that didn't work failed largely because it was too expensive, too inflexible and in many cases unlikely to yield the promised savings). Governments need to take action, because if they don't they'll be thrown out when the lights go out - and that will be the least of our troubles!

And when our energy supplies are truly secure we’ll never be held to ransom by foreign powers.

Fracking - no silver bullet

The government today invites applications for licences to frack for gas and oil across the country. We need an energy security policy, but fracking is not the answer.

We used to be self-sufficient in energy with limitless reserves of coal. Then we found North Sea oil and gas and the party went on. Now these reserves are running out and we are importing significant amounts of energy.

Although most people believe that much of our gas now comes from Russia that’s not true. About 70% comes in equal proportions from the British and Norwegian sectors of the North Sea and some 20% by ship from Qatar in the Persian Gulf. North Sea reserves are declining and although Qatar is a stable state that is certainly not true of the rest of the Middle East. The ISIS fundamentalists have already taken over large parts of Iraq, including a major oil refinery, and their aim is total domination. Supplies from the Middle East are at risk. If we can extract oil and gas from shale beneath our feet in Britain it’s surely the obvious way to control the supply and the cost of essential energy. In the USA fracking has revolutionised the energy industry. Energy prices have fallen with significant benefits to US industry. The increased use of gas has pushed down the world price of coal (which is one of the reasons why we are using more coal for electricity generation in Britain at present.) 

There have been protests against fracking in the US and the same arguments are now being made here. “Fracking pollutes the groundwater - people’s drinking water is at risk.” “Fracking causes earthquakes.” “Fracking uses vast amounts of water, some of which is recovered and is polluted.” Some of the  pollution arguments are difficult to support. Yes, in the US some people have turned on the tap and been able to light a stream of gas bubbling out of the water. The question is whether this is due to fracking or is naturally occurring. Fracking, which involves driving high-pressure water, chemicals and sand into shale beds to split them apart and release gas, takes place 650m - 800m below the level where drinking water is extracted [British Geological Survey], so it’s unlikely to affect it. There are certainly concerns about water in general. Yes, fracking does use vast amounts of water in the initial stages and this is usually trucked in. Constant lorry movements will be a major impact on local communities. About half the water injected into the shale bed is recovered and has to be treated. Among other things, it’s mildly radioactive. It cannot be sent to the normal sewage treatment works. And what about the water that is not recovered? Where does it go?

Earthquakes? Earth tremors were recorded after exploratory drilling near Blackpool, but they were very minor and about the same magnitude as natural tremors which occur all the time. They are not house-shaking events: they can only be detected with special equipment.

Apart from lorries carrying water to the wellheads, how will the gas or oil be carried out? Either by building pipelines or connections to the national gas grid, or by sending in yet more lorries. It has been suggested that unlike conventional wells, fracking wells can dry up in as little as four years. The only solution is to up sticks, move on and drill somewhere else - not necessarily very far away.

So is the inconvenience of fracking justified by the benefits of energy security, cost control and job creation for the nation? Maybe, if it works. The British Geological Survey has found that there is significant oil beneath the Weald in southeast England and significant gas in the north. It cannot say how much of this is commercially recoverable. It cannot at this stage say whether the geology is similar to the areas in the US where fracking is successfully established. It is possible that the shale beds are folded or uneven because of geological activity, making extraction difficult or impossible. 

Oil and gas from fracking will not be cheap. Extraction is an expensive process and the high level of popular opposition to fracking indicates that there will be policing and security costs as well. It won’t provide a new source of energy overnight. It won’t avoid the blackouts that have been predicted for Winter 2015 in reports since 2005. Oil and gas from fracking are still CO2-bearing fossil fuels, not helping our carbon-reduction targets.

Fracking is no silver bullet.

Sustainability Sells

My article was published in the May/June 2014 issue of Winning Edge, the Magazine of the Institute of Sales and Marketing Management.

If you’re not part of Team Green you may not be on your clients’ preferred list for much longer. Green? Isn’t that about people in sandals and beards saving the polar bears? Maybe, but today we’re talking about green business, and how it’s affecting you, your clients and your sales.

Sixty-five of the world’s largest corporations, from Abbot Laboratories through BSkyB, Ford, Microsoft, Philips and Coca-Cola to Wal-Mart wrote to all their suppliers last year and asked them to disclose how they were going to cope with climate change.  And green business is not just about climate change, it’s about sustainable forests and sustainable fisheries, it’s about renewable energy, water, waste, carbon footprints and scarce resources. Open any FTSE 100 Annual Report and the Corporate Sustainability Report drops out, showing how they are making the world a better place. In a word, Green Business is going mainstream, and your clients will soon be knocking on your door to ask what you’re doing about it, if they aren’t already. 

In practical real-world terms, what does all this mean for you and your sales team? It’s about understanding the client’s needs - something you do all the time - but recognising that those needs are constantly changing. They can’t be truly green without your help. For your client, there are three main drivers towards sustainability - Reputation, Revenue and Regulations. Help yourself by helping your clients with these. 

But hang on! Before you start, do you know how your own organisation measures up? Have you seen the corporate environmental statement? Does your company work to ISO 14001 or any of the other sustainability standards? Make sure that you and your team can give the client the full picture. Make sure the people in back office and boardroom are giving you the full picture!

Reputation is the Number One driver which puts suppliers in the spotlight. Since the supermarkets found horse meat in their burgers and the press revealed the sort of conditions that Apple iPads were made in, these organisations have been desperate to claw back their credibility. Everyone else has been desperately looking at suppliers to make sure that nothing like that will ever affect them. If you do the minimum, their reputation is safe. If your company is doing more than it needs to, you’ll be more attractive as a supplier. On the other hand, in the face of the consumer your clients need to put their hands on their hearts and tell the world that they’re doing their greenest best - and if you’re not green and you supply them you’re making liars of them.

Number Two, Revenue, or profitability, is a key part of sustainability. Sustainability is about doing more with less. If we can build the same product with less material we’re saving material cost. We may be saving production time, using less energy and making less waste as well - all driving more profits to the bottom line. How can you help your customer do more with less? Can you offer a product, a process or a system which will make your own clients more efficient and save them money? Makes it easy for them to make the business case! Can you do it before your competitors do?

Number Three - Regulations - everyone’s favourite! Quite simply, if you’re not complying with the increasing number of regulations it’s a deal-breaker - at the very least. Of course it’s not just the regulations that your own organisation has to obey, you have to think about it from the customer’s point of view. ISO 14001 - Environmental Management and ISO 26000 - Social Responsibility are desirable but not legally binding. On the other hand, REACH (Registration, Evaluation, Authorisation and restriction of Chemicals) and the CRC Energy Efficiency Scheme are just two of the many regulations which must be observed to avoid penalties.You don’t always need to be an expert in these things, but you do at least need to be aware of the jargon and know whether these are issues you can help with. Things are changing all the time, so if you keep up to date on the regulations affecting your particular market, part of your added value could be helping your clients keep up to date as well.

Objections? There are always objections, and there are very strong opinions on both sides of the question. You don’t need me to tell you not to get into an argument! 

“You’re not doing nearly enough!” To answer that you need to be clear on exactly what your organisation is doing and you need to know that what you are offering will comply with the standards that your client must meet. Ideally you’ll also know what’s being planned to make your organisation even greener.

At the other extreme: “This green rubbish?” (Didn’t the prime minister say something like that?) “It’s all a waste of time and money!” Actually, sustainable business is all about efficiency and doing more with less. Companies adopting a sustainable strategy are finding that it generally saves money. Savings you can share with your clients, even if they don’t believe that sustainability is a good thing.

Should you walk the sustainable talk? Certainly there will be some people who will be really upset if you turn up in a gas-guzzling 4x4. How about rewarding your top salesman with a hybrid? The Porsche Panamera, for example, or maybe a Lexus. There are green cars right across the range now. The BMW i3 is certainly worth a look. With 0-62mph in 7.2 seconds and a range of up to 200 miles it’s not at all what you expect from an all-electric car!

“It’s just a fad, isn’t it?” No, sustainability is here to stay. It’s the new way of doing business and the new way of staying in business, in the face of expanding world population, rising energy prices and declining resources. If sustainability was just a fad, would Tesco have set up its Knowledge Hub - the world’s largest sustainable supply chain resource? Would 722 institutional investors holding US$ 87 trillion in assets be supporting CDP to monitor the climate risk in their portfolios? Would Dow Jones have been publishing a sustainability index for the last 15 years? Would we have ever heard of the Global Reporting Initiative, Environmental Impact Statements or Carbon Footprints?

So sustainability is firmly here to stay. And as always, to succeed in this competitive world we all have to keep that one jump ahead. It’s not enough to be lean and mean. This time, you’ve got to be lean, mean and green as well.

Climate Change not an important issue for the Institute of Directors

Graham Leach, the previous Chief Economist at the Institute of Directors, wrote in the Director magazine of February 2014: ”10 years from now man-made global warming will have been exposed as a myth.” When James Sproule, his successor, visited Leeds last month I asked whether he endorsed that view. His response and my comments are below. I spoke to him again  this morning and he told me that climate change was not an important issue for the IoD.

In response to my question James Sproule said that there was disagreement within the IPCC (Intergovernmental Panel on Climate Change) between scientists and economists. The economist view is that it is reckless to plan for what might happen in 100 years’ time when so much has radically changed in the last 100 years and so much more will change in the next.

Here's what I think.
First of all, Graham Leach was not commenting on the planning cycle, when he said “man-made global warming will have been exposed as a myth.” He was rubbishing the science, which he is surely not qualified to do. His remark is reckless in that it could lead the uninformed to believe that there is nothing to worry about and nothing need be done. The report from the IPCC last month shows that it is 95% scientifically certain that we are on the threshold of a problem which will have serious consequences far sooner than 100 years hence. 

Secondly, not all economists suggest that we should sit on our hands and wait and see what happens. Lord Stern published his report in 2006 where he stated that a relatively small investment of global GDP could mitigate the worst effects of climate change if action were taken promptly. Since then he has written that things are worse than he then thought, and since not much action has been taken the cost of mitigation is now very much greater.

Third, CDP, the Carbon Disclosure Project, is an organisation backed by more than 750 global institutional investors who have assets worth $US92trn under management. Each year they request information on greenhouse gas emissions, energy use and the risks and opportunities from climate change from thousands of the world’s largest companies. If they take the trouble to do this they surely believe there is an issue and that the information will enable them to take action - else why collect it?

In my view the future is sustainability. Sustainable business is essentially efficient business, and there is nothing new in examining each stage of the production process to see what improvements or cost savings can be made. Carrying out this analysis from a sustainable viewpoint could mean assessing the availability of key materials and redesigning products to make less use or no use of them. It could mean embracing new technologies such as 3D printing, where there is minimal waste and large parts of the supply chain can become redundant, so transforming some industries. The circular economy will become increasingly important as producers redesign not just to make less use of materials but to produce items that can be disassembled, remanufactured and re-used, thus saving the costs of new materials and the cost of waste disposal. Sustainable business is good business. Developing renewable energy is sustainable from the energy security point of view. Nobody controls our wind and no one can cut off our sunshine. We don’t get much gas from Russia, but we do get 20% of it from Qatar by sea. As the North Sea declines we’re a net importer of oil. A generation ago we were self-sufficient in energy. We can be again. (Without fracking.)

We have challenges. Climate Change is just one of them, but we need a clear understanding, a clear direction and a positive lead on the whole sustainable future. The “greenest government ever” has failed to develop coherent policies. I would like to think the IoD could inject some informed realism into the debate. 

If you can spare 9.33 minutes, have a look at this video http://youtu.be/zORv8wwiadQ 

Energy and the Bubble Economy

On 20th May the Yorkshire Chapter of CASSE, Centre for the Advancement of the Steady-State Economy, presented this event at Leeds University Business School. I expected one session but there were two separate presentations.

Energy

Tiago Domingos of the University of Lisbon took the first module: “Can energy use and economic growth be decoupled?” Green growth is possible by reducing the energy/GDP ratio, and to do that we need to decarbonise the energy system. This proved to be a technical talk; knowledge of thermodynamics a distinct advantage. Apparently energy cannot be destroyed and in any energy transfer there are always losses. This is demonstrated by our present electricity generation process, where around 60% of primary energy is wasted in generation and transmission and only 20% of what’s left (Final Energy) is Useful Energy. The rest is dissipated as heat in the appliance. He claimed that an output of 0.02kWh needs an input of 25kWh, which seems to be overstating the case a bit, but even a loss of 90% is bad enough. We pay for final energy - and all the primary energy that goes into it - and waste most of it in inefficient appliances.

We now moved on to the thermodynamics bit and started talking about exergy. I hadn’t heard of it before, but this is what Wikipedia says:   

“In thermodynamics, the exergy of a system is the maximum useful work possible during a process that brings the system into equilibrium with a heat reservoir.[1] When the surroundings are the reservoir, exergy is the potential of a system to cause a change as it achieves equilibrium with its environment. Exergy is the energy that is available to be used. After the system and surroundings reach equilibrium, the exergy is zero.”

The professor then went on to propose that we should study exergy rather than energy, and gave examples of sources of exergy: electricity, coal, gas, biomass, oil, food. (Note that electricity is a source of exergy, but of course not of energy.) He stated that the important ratio is not energy/GDP but Useful Energy/GDP. There followed an analysis of energy statistics for Portugal since 1850 when the economy was agricultural, through industrialisation from 1920 and onwards. The Final Energy/GDP ratio dropped sharply and plateau’d from 1960. Useful Work/GDP was at the same level as 1850, although primary energy consumption went up.

Domingos quoted the economist, Nicholas Kaldor, who said that in the long term the wages/interest, interest/capital, capital/GDP and Useful Work/GDP ratios were constant in most economies. There are also thermodynamic limits to the efficiencies of transforming primary to final energy and final to useful energy. The whole thing seems to lead me to the conclusion that there is very little scope for decoupling energy from economic growth. What hope for growth? Having said that, surely it all comes down to efficiencies. And while electricity generation from coal, gas, nuclear and even biomass can have losses of as much as 70%, the losses in generation from renewables are less than 1%.

I found this on the internet: http://www.theguardian.com/news/datablog/2012/jul/06/energy-green-politics#zoomed-picture 

The Bubble Economy

Our second speaker was Robert Ayres (from INSEAD in France) who will shortly publish "The Bubble Economy: Is There a Sustainable Way Forward?”. 

This was a very different presentation, and referred to Tulip Mania, the South Sea Bubble, the Trust Bust, the Dot-com Crash and the Sub-prime Disaster, among many others which litter history. Apparently there is a plausible story and investors start to pile in. Rumour builds on rumour, possibly helped along, until every man in the street sees a golden opportunity and mortgages his house to buy in. Canny investors get out at the top, confidence evaporates, prices crash and small investors lose their houses. Ayres predicts another bubble, this time involving fracking. Presumably that will happen in the US. After this week’s report from the UK Geological Survey few people in this country will surely invest!

Since 2008 we have seen pressures in the economy from climate change and the end of cheap oil, leading to inequalities and a slow recovery. In 2008 the banking system was under such extreme stress that governments had no choice but to rescue it. Household net worth collapsed and the middle classes have still not yet recovered. Oil price rises are inevitable because the rate of new discovery of oil is not keeping up with production. Saudi Arabia continues to be a major global oil producer, but its recoverable reserves remain, and have remained constant since 1988. (This is apparently justified by improving extraction techniques.) The oil price affects the global economy, but Ayres claims that it is only recently that the IMF has included the price of energy in its models. We need to decarbonise our energy and this is becoming more achievable as the average cost of onshore wind has been falling annually by 14%. The price of solar PV is falling faster; not yet to grid parity, but arguably coal generation benefits from hidden subsidies in that it does not pay the true cost of pollution. The costs of renewables and hydrocarbons are reaching a crossover point as new technologies, experience and economies of scale drive down renewable costs. Could we create a renewables bubble? Ayres told us that there are substantial reserves held by US corporates in overseas banks and doing nothing. Let’s not have a bubble, but let’s have some solid investment.

The future growth paradigm will be based on energy efficiency, not demand.

Questions

Questions came thick and fast and this a summary of what I picked up. 

Why will energy costs rise? asked a former Shell executive. Because Saudi is running out and the projected reserves in the US have been overstated and we are using it faster than we’re finding new reserves. Well, when he was at Shell they tried predicting the oil price and got it totally wrong….

Can we really substitute electricity for oil? Yes, but it is difficult and time-consuming which is why the price of oil matters…Is 30% the maximum share of energy that the UK can source from renewables? I would have thought that was pessimistic, myself.

If the future is efficiency, what about user behaviour? The rebound effect means consumers can spend the same and use more. Prices must be controlled by governments to prevent this. A green levy could keep expenditure at constant levels and raise a fund for green research and investment.

Will lower-quality reserves demand more energy? Energy in for energy out is a problem with fracking...Timescales for decarbonising the economy are a concern. There are big opportunities for improving efficiency - notably transport and home heating (cars are still very inefficient) - but if we are serious about our 2050 targets we have a serious problem. Current policies - and politicians - do not recognise the extent of the challenge.

Education is lacking in high places.

And my conclusion? As always, spread the word. Make people aware that business as usual is not an option. Make them aware that big business has generally taken all this on board, but small business and the consumer need to follow on. It’s not about a lower standard of living, it’s about doing things differently and more efficiently. It’s about not sacrificing the long term for the sake of the short term. 

Please tell any politicians you meet.

Business Success in a Changing Climate

Yesterday I went to EcoFair14, an exhibition and conference with six parallel presentation streams. It was great to meet friends and make new contacts; to see established products and find out what has been developing over the last year.

My first session was Business Success in a Changing Climate by John Chubb of yourclimate.org  Rather than business success, he was talking about business resilience which of course is equally important. He started with the statistic that 80% of organisations without emergency continuity plans never fully recover from a disaster. And he reminded us that there had been severe weather incidents every year since 2000 in the UK. We've seen freezes, floods, water shortages and heatwaves. In that time the Great Yorkshire Show had to be abandoned and there was the East Coast surge; ice and snow closed roads, schools and businesses and some agricultural crops were wiped out. What is certain is that extreme weather events will be more frequent in the future and a move to a low carbon economy won’t change it. We can expect warmer, wetter winters; hotter, drier summers and it’s far cheaper to prepare than to react. (Didn’t Lord Stern say something like that back in 2006?)

John gave us case studies: the chemicals firm that moved its IT to the first floor and its electrics to the roof, bolted down its bulk tanks to stop them floating away and built a bund to keep all but the worst of the water out. He told us about the plant hire company that was unable to hire out pumps in a flood because its own premises were under water. A firm that survived - but only just.

Resources

John gave us all his excellent guide to Weathering the Storm. If you contact him via yourclimate.org maybe he’ll send you one. He pointed us to the Association of British Insurers, which publishes advice on flood prevention and also looks at the future from an insurance point of view https://www.abi.org.uk/Insurance-and-savings/Topics-and-issues/Join-the-debate/Identifying-the-challenges-of-a-changing-world If you want to know if you’re in a flood risk area the Environment Agency has the answer: https://www.gov.uk/prepare-for-a-flood . Sometimes we get a heatwave which can be dangerous for the elderly and very young and can cause problems at work. More advice from the NHS: http://www.nhs.uk/Livewell/Summerhealth/Pages/Heatwave.aspx and from the Health and Safety Executive: http://www.hse.gov.uk/temperature/  You can assess your business resilience at businessresiliencehealthcheck.co.uk from Business in the Community. There are Local Resilience Forums, where businesses can get together to assess risks and work together to meet them. This is the one on the Humber: heps.gov.uk 

John’s final points were that customers increasingly need to know that their suppliers are secure. (See my Green Supply Chain workshop!) The impacts of extreme weather are neither equal nor fair.

A great start to the event. More about other presentations to follow.

Climate Change, life and death

Professor John Broome, of the University of Oxford and author of “Climate Matters”, delivered the Royal Institute of Philosophy lecture at York University this week.

His is a philosophical approach to climate change. How is that relevant? The United Nations Framework on Climate Change sets out to avoid “dangerous anthropogenic interference with the climate system.” To achieve this it needs to:

1. Identify the level of emission concentration in the atmosphere low enough to prevent dangerous interference
2. Define acceptable global annual emissions
3. Allocate these annual emissions fairly  among nations

Moral philosophers are involved in stage 3, but stages 1 and 2 are decided by scientists, economists and politicians. Professor Broome disagrees with this because value judgements are involved at all three stages and he doesn’t believe that scientists, economists and politicians are much good at making such judgements. He is concerned that the UN Framework on Climate Change suggests that decisions on what constitutes dangerous climate change are value judgements and should be “determined through socio-political processes.” He doesn’t think the result of this process can be readily supported. The IPCC has set a target of a maximum emission of 1 trillion tonnes because that gives a better than 2/3 chance of keeping global warming below 2°C. Why 2/3? Why 2°C?

Professor Broome believes that decisions should be made on expected values, not on likelihood. For example, the likelihood of the average house burning down is very small but the consequences are likely to be very serious. Because of the value of the catastrophe, it makes sense to buy a fire extinguisher.

How can we evaluate the harms and benefits of climate change? People are already dying as the result of climate change. The effects of weather are significant, leading in turn to poverty, malnutrition and disease. The fact that people die as a result of climate change is negative in itself, but as a consequence of their deaths there are fewer descendants and future generations are smaller, even to the extent that human extinction becomes an increasing possibility. The effect of climate change on the population - and vice versa - is largely ignored by governments. Some argue that changes in population levels are ethically neutral: Broome challenges this, but admits that we have no consensus on how to take these changes into account. The population elephant remains in the room.

Questions at the end of the session drew the comment that being nice is not good enough. We need to promote green virtues, but there are not enough virtuous people, so the only answer is government coercion. 

One questioner suggested that burning all the fossil fuel reserves in the world would not have serious consequences. He couldn’t quote supporting figures. Professor Broome disagreed but could not provide opposing figures and neither could I. However, it’s all here: 

http://eye.carbontracker.org/analysis-reports/view?analysisReportId=15552